Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216632 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8236
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper discusses lessons that other regions could learn from European Union's effort to implement carbon pricing through EU Emission Trading System (EU ETS). Our lessons are, first of all, that a cap-and-trade system like EU ETS is very helpful in guaranteeing a credible and binding reduction of emissions through its cap within the sectors subject to this regulation. Second, providing enough flexibility for trade, in particular intertemporal trade, is essential but should also be guided with care. The current quantity rules for the Market Stability Reserve to steer the abundancy of allowances seems a promising new feature for cap-and-trade policies, although price collars for newly designed systems create more transparency. Third, it is far from obvious why EU ETS should cover the entire carbon emissions base if other instruments, like (implicit) carbon taxes are already available. Finally, EU ETS seems at least partially responsible for the observed steady reduction of carbon emission within the EU ETS sectors. However, the gradual tendency to outsource emissions to other regions justifies carbon border adjustment mechanisms for selected sectors if other regions do not impose carbon pricing rules.
Subjects: 
climate policy
carbon pricing
European Union Emission Trading System
Market Stability Reserve
JEL: 
D47
D62
Q54
Q58
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.